Correlation Between Zijin Mining and Western Digital

Can any of the company-specific risk be diversified away by investing in both Zijin Mining and Western Digital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Zijin Mining and Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zijin Mining Group and Western Digital, you can compare the effects of market volatilities on Zijin Mining and Western Digital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Zijin Mining with a short position of Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zijin Mining and Western Digital.

Diversification Opportunities for Zijin Mining and Western Digital

0.05

Correlation Coefficient

Zijin Mining  Western Digital

Significant diversification

The 3 months correlation between Zijin and Western is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and Zijin Mining is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Zijin Mining Group are associated (or correlated) with Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Zijin Mining i.e., Zijin Mining and Western Digital go up and down completely randomly.

Pair Corralation between Zijin Mining and Western Digital

Assuming the 90 days horizon Zijin Mining Group is expected to generate 3.64 times more return on investment than Western Digital. However, Zijin Mining is 3.64 times more volatile than Western Digital. It trades about 0.06 of its potential returns per unit of risk. Western Digital is currently generating about 0.07 per unit of risk. If you would invest  95.00  in Zijin Mining Group on September 22, 2024 and sell it today you would earn a total of  90.00  from holding Zijin Mining Group or generate 94.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.73%
Values	Daily Returns

Zijin Mining Group  vs.  Western Digital

Zijin Mining Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zijin Mining Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Zijin Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Western Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Zijin Mining and Western Digital

The main advantage of trading using opposite Zijin Mining and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zijin Mining position performs unexpectedly, Western Digital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Western Digital will offset losses from the drop in Western Digital's long position.

The idea behind Zijin Mining Group and Western Digital pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.